Saturday, January 29, 2011

Well, the writing is on the wall it seems. I could be wrong, but appears Mubarak is done. His sons have left the country and Omar Suleiman has been sworn as the first vice president Egypt has had in 30 years. I expect an announcement of power transfer reasonably soon. Judging by the tweet streams, appears most people there believe the military has pushed Mubarak into this. Something has to happen soon, as police and internal security are abandoning posts to join in semi-organized looting. Several police stations have come under direct attack by armed protesters. The declared 4pm curfew seems to have been largely ignored, most recent reliable est I've seen is over 50k still in streets in Cairo. Cairo is 7 hrs ahead of US eastern time.

Suleiman would be a very acceptable replacement to Israel & the West. Whether he'll be acceptable to the Egyptian people is another question. He has been the director of the Egyptian General Intelligence Services (EGIS) since 1993. Prior to that he was director of military intelligence. He is considered a relatively liberal Muslim, strongly opposed to radical Islam. He was the mastermind behind the fragmentation of Islamist groups who led the uprising against the state in the 1990s. He's been a key behind the scenes player in the Israeli/Hamas/PA/Egypt/US back-and-forth, and appears to be trusted [in a relative sense] by the current Israeli govt. He's been more public in direct diplomacy between Israel and Egypt. As Egypt's intelligence chief, Suleiman has been in charge of the country's most important political security files, the ultimate insider. He is 75.

Aviation chief Ahmed Mohamed Shafik, until a few hrs ago widely considered the front runner to replace Mubarak, has been appointed Prime Minister.

NOT clear that being in Egypt means one knows more than the rest of us, of course. But there it is, for what it's worth...

Correct me if I’m wrong, but aren’t China and Iran really far away? I realize that both pose a potential threat to American security. But don’t they also pose a threat to lots of other countries that are actually in their neighborhoods? So, if we appoint ourselves world police, and foot the bill for a correspondingly gargantuan arsenal, aren’t we suckers? You might reply that our disproportionate role in policing reflects the fact that these nations threaten the United States disproportionately. On Iran’s vitriol list, the United States ranks high. And Chinese leaders direct more coded warnings toward America than toward, say, Brazil. But this logic is circular. A big reason that some nations view us so warily is that we assume the role of global cop — or, as they see it, of global bully.

...By declaring ourselves global cop, we direct so much of the world’s lethal animus toward us that increasingly it does seem to make sense to take the lead in policing the world. So we dig ourselves into an ever deeper hole with a policy that, in a perverse and ultimately catastrophic way, renders itself ever more plausible.

... People who, like me, raise questions about the value of global military engagement are sometimes called 'isolationists.' But that term rightly applies only to people who don’t realize that there are threats to our security out there. If you perceive the threats but realize that they’re collective action problems, you realize that we do have to be involved in their solution. [Robert Wright, NYT op-ed]

Tempting to say this is a parable of government incompetence. But it's unfair to call MILITARY incompetence "government." All military procurement, everywhere, is aggressively snafu-ed and always will be.

There's an awesome AP article this morning with the headline "Social Security Fund Now Seen To Be Empty by 2037"

People, I've got news for the AP: That sumbich is empty now!

Ahorita mismo!

Every penny of payroll tax revenue is spent to help cover current general expenditures. We can't even really say which general expenditures because money is fungible.

Payroll tax revenue is not being saved or invested.

If payroll tax revenue was really in a "lockbox", then it wouldn't count in figuring out the current deficit would it? Well it certainly is counted as general revenue when the government calculates its deficit.

Your payroll taxes do NOT fund your personal social security retirement benefits. Future social security benefits are unfunded liabilities of the federal government, payable out of future tax revenues.

Wednesday, January 26, 2011

One day later and confirmation arrives that the economic illiteracy on display at SOTU was not a just a mirage or bad dream.

Here are some money quotes from today:

The president said Wednesday that while China invested in clean energy technologies, "we fell down on the job. We weren't moving as fast as we should have."

"We're going to need to go all in. We're going to need to get serious about winning the future,"

People, this is just plain nuts!

China subsidizing investments in clean energy technology is VERY VERY GOOD for us. If they make a breakthrough, what, they won't sell the product to us? Really?

Is it surprising to anyone that Jeffrey Immelt, Obama's new "jobs czar" runs a company that makes wind turbines?

"We're going to need to get serious about winning the future" is the stupidest thing I've heard a president say since "Too many OB/GYN's aren't able to practice their love with women all across the country."

America is not going to recover its greatness by pissing money away on choo-choos and windmills.

Tuesday, January 25, 2011

My favorite part: the "Personal and Confidential" thing at the top. If you cut off ties, bail on your skybox, and renege on contribution pledges, then tell me why oh why would you expect them to keep the letter confidential. Here's the first page. What an asshat.

Makes me think of "LIFE OF BRIAN": You are only making things worse for yourself.

Worse? How can they get any worse? Jehovah, Jehovah, Jehovah! Now read your letter in the PAPER, pumpkin! How do ya like me NOW?

On the one hand, the FDA drags its feet and makes the drug approval process expensive and interminable, while the costs of prescription medicines were constantly targeted in the Health Insurance Extension & Expansion debates.

"The new effort comes as many large drug makers, unable to find enough new drugs, are paring back research. Promising discoveries in illnesses like depression and Parkinson’s that once would have led to clinical trials are instead going unexplored because companies have neither the will nor the resources to undertake the effort."

Ummm, this is willfully obtuse, even for the NY Times.

Isn't it more likely that Big Pharma is doing a cost benefit analysis and sees the costs going up and the benefits going down?

Isn't it likely that Big Government has caused a substantial part of the problem they are now looking to solve?

Of course a billion dollars is chump change in the prescription drug R&D market but never fear:

The initial financing of the government’s new drug center is relatively small....but officials hope that the prospect of finding new drugs will lure Congress into increasing the center’s financing well beyond $1 billion.

I can tell you one thing, people. I'd like to get some of whatever drugs were behind this great idea.

Abstract: The increase in income per capita is accompanied, in virtually all countries, by two changes in economic structure: the increase in the share of government spending in gross domestic product (GDP), and the increase in female labor force participation. We argue that these two changes are causally related. We develop a growth model based on Galor and Weil (1996) where female participation in market activities, fertility, and government size, in addition to consumption and saving, is endogenously determined. Rising incomes lead to a rise in female labor force participation as the opportunity cost of staying at home and caring for the children increases. In our model, higher government spending decreases the cost of performing household chores, including, but not limited to, child rearing and childcare, as in Rosen (1996). We also use a wide cross-section of data for developed and developing countries and show that higher market participation by women is positively and robustly associated with government size. We then investigate the causal link between participation and government size using a novel unique data set that allows the use of the relative price of productive home appliances as an instrumental variable. We find strong evidence of a causal link between female market participation and government size. This effect is robust to the country sample, time period, and a set of controls in the spirit of Rodrik (1998).

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Historical Trust Levels Predict the Current Size of the Welfare State

Andreas Bergh & Christian BjørnskovKyklos, February 2011, Pages 1–19

Abstract: Despite the fact that large welfare states are vulnerable to free-riding,the idea that universal welfare states lead to higher trust levels in the population has received some attention and support among political scientists recently. This paper argues that the opposite direction of causality is more plausible, i.e. that populations with higher trust levels are more prone to creating and successfully maintaining universal welfare states with high levels of taxation where publicly financed social insurance schemes. The hypothesis is tested using instrumental variable techniques to infer variations in trust levels that pre-date current welfare states, and then using the variation in historical trust levels to explain the current size and design of the welfare state, and finally comparing the explanatory power of trust to other potential explanatory factors such as left-rightideology and economic openness. To infer variation about historical trust levels, we use three instruments, all used previously in the trust literature: the grammatical rule allowing pronoun-drop, average temperature in the coldest month and a dummy for constitutional monarchies. Using cross-sectional data for 77 countries, we show that these instruments are valid and that countries with higher historical trust levels have significantly higher public expenditure as a share of GDP and also have moreregulatory freedom. This finding is robust to controlling for several other potential explanations of welfare state size.

Sunday, January 23, 2011

I'd like to chip in with a Public Choice reading list for people who don't want to be bored to death!!

These three will teach you everything you need to know and keep you entertained and turning the pages. You'll learn PC by accident!

1. "Catch-22", Joseph Heller

2. "Parliament of Whores", P.J. O'Roarke

3. "Misadventures of the Most Favored Nations", Paul Blustein

On a more academic note, Olson's "Rise and Decline" just gets too much wrong to recommend it; I'd pick "Logic of Collective Action" instead, along with "An Economic Theory of Democracy", "An Economic Interpretation of the Constitution of the United States", "The Calculus of Consent" (though this book is *very* uneven), and "The Theory of Committees & Elections" (Scots wha hae and all that).

When it comes to textbooks, Mungo and the late Mel Hinich cooked up a great one with "Analytical Politics".

I think the way for people to learn about a subject is to read entertaining works that illustrate the subject in action rather than to bang their heads on encyclopedic reference works.

I learned a lot about the sub-prime crisis from reading "The Big Short" just by accident while being absorbed in a terrific story.